Conservatism and Debt

Anne Beatty, Joseph Weber, Jeff Jiewei Yu

Research output: Contribution to journalArticlepeer-review

250 Scopus citations


Despite the unquestionable influence of conservatism, disagreement remains about what economic demands lead to financial reporting conservatism. Research examining lenders' demands for reporting conservatism has been questioned for ignoring conservative contract modifications. We document that these modifications exist but are not ubiquitous. We find contract modifications are more likely when agency costs are higher and litigation, tax and equity demands for conservatism are lower. However, we find a positive association between unexplained reporting conservatism and contract modifications, suggesting contractual modifications alone do not fulfill lenders' demands for conservatism.

Original languageEnglish (US)
Pages (from-to)154-174
Number of pages21
JournalJournal of Accounting and Economics
Issue number2-3
StatePublished - Aug 2008
Externally publishedYes


  • Conservatism
  • Covenants
  • Debt Contracting

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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